Saturday, May 07, 2011

Latin America had the strongest growth in incoming and outgoing FDI in 2010

Latin America and Caribbean was the region with the strongest growth in incoming and outgoing Foreign Direct Investment( FDI) in 2010. The region had the highest percentage increases as a recipient and source of FDI, according to a report presented by the Economic Commission for Latin America and the Caribbean (ECLAC) on 5 May. FDI inflows were up by 40% with respect to 2009 and stood at a total of US$ 113 billion.This is the third highest for the region after the 134 bn FDI in 2008 and the 114 bn in 2007.Outflows increased almost fourfold to reach an all-time high of US$ 43 billion.

For 2011, FDI flows to Latin America and the Caribbean are expected to maintain this trend and increase by between 15% and 25%.

Is this not remarkable considering the uncertain times in the developed markets? It is a reflection of the new paradigm of Latin America whose companies went out investing 43 bn $ when bailout is the cry heard in Europe. There are not anymore IMF cases in Latin America..They have shifted to Europe... Brazil is a net creditor to IMF !

The region's main FDI recipient was Brazil, where FDI inflows posted a record surge of 87%, going from 25.949 billion dollars in 2009 to 48.462 billion dollars in 2010.

The second main recipient was Mexico (17.726 billion dollars), followed by Chile (15.095 billion dollars), Peru (7.328 billion dollars), Colombia (6.760 billion dollars) and Argentina (6.193 billion dollars).

The only country which bucked the trend and had a negative inflow of FDI prize for guessing… Venezuela.

In 2010, Chinese companies invested 15 billion dollars in Latin American and Caribbean countries, mainly in the form of mergers and acquisitions. For 2011 China has announced plans for investment of 22 billion dollars.

In 2010 China became the third largest investor in Latin America and the Caribbean, with a share of 9%, behind the United States (17%) and the Netherlands (13%).

Chinese investment has mainly been in Brazil, Argentina and Peru. Over 90% has targeted the extraction of natural resources, particularly the hydrocarbon sector and, to a lesser degree, mining. The State petroleum company Sinopec carried out the largest investment by acquiring 40% of the Brazilian operation of Repsol-YPF for 7.111 billion dollars. The oil companies CNOOC and Sinochem also announced major acquisitions in Brazil and Argentina, respectively. In terms of mining, the major companies are Chinalco and Minmetals (Peru) and Wuhan (Brazil).

The main drivers for the incoming FDI in Latin America are the boom in the demand and prices of oil, minerals, agroproducts as well as the growing domestic demand.

The outward FDI of 43 bn$ is the highest in the history of the region. The last highest was 41 bn$ in 2006 and the thrid highest was 36 bn in 2008. Mexico was the country that invested the most abroad in 2010 (12.694 billion dollars). This was followed by Brazil (11.5 billion dollars), Chile (8.744 billion dollars) and Colombia (6.504 billion dollars).Most of the investment went into other countries of the region.

The large Latin American companies investing abroad are called as Multilatinas or TransLatins. These are companies such as Vale, Petrobras, JBS and of course, the companies of the world's richest man Carlos Slim from Mexico.

The Indian companies which made major investment in the region in 2010 include Renuka Sugar, Godrej and Aegis. In 2011 UPL has already invested 600 million dollars in Brazil.The latest investment is by Glenmark whose new pharma plant in Buenos Aires was inagurated by Minister of State for Commerce and Industry on 3 May 2011 along with Argentine Minister of Industry Debora Giorgi.

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